Asia’s relationships challenge trans-Atlantic brands

Can brands survive in emerging markets? Today I’ve been hearing how Katerina Mavroidis, the Beijing-based global brand strategist, answers that question. For the last few years Mavroidis has been helping clients of Saatchi and Omnicom to put down deeper roots in China, the world’s fastest growing marketing market (Note: Omnicom owns my former employer).

Emerging, high-growth BRICK markets are of great interest to telecoms and technology companies. However, it’s unclear if their existing brand equity can aid the internationalization of their businesses. In particular, it’s very unclear to many local managers that strong brand equity is needed in high-growth markets. In particular, Asia’s relationship-driven business models mean that marketing budgets are often diverted into commissions for the sales channel and price discounting.

In turn, that places increasing pressures on marketing leaders outside Asia. Many leading organisations use a centralised ‘brand-guardian’ team as a global hub for creative and brand management.

That’s especially common here in London, which some consider to be the birthplace of brand planning. European locations are often favored by US firms too: In Europe, some reasoned, one could more easy remove the US-specific elements of corporates and uncover a more universal brand. Therefore there is an established notion: that a brand that moves trans-Atlantic is one which has globalised. But that was the twentieth century, in which the Western hemisphere was dominant.

Now, in a twenty-first century in which the balance of power will swing over to the Eastern hemisphere, internationalising no longer means moving between the US and Western Europe, with their connected cultures. It’s about China, Brazil, Korea, India… very different cultures. So, what happens to superbrands in China? The answer to that questions teaches us powerful lessons about in what way brands have to internationalise if they are to flourish in high-growth markets.

Because of their rapid growth those emerging markets, and especially China, are very interesting to super-brand companies. By definition, they pose new challenges and new opportunities which differ sharply from mature markets. There’s a lot of urgency: the notion of losing – of opportunities that are on the table now, but which are fast disappearing – is powerful. A lot of firms are rushing to get into China, and other BRICK markets. Of course, we might say, it’s mistaken to think of a simple land-grab, since relationships are slow to grow in Asia. However, many firms are surging into BRICK markets without laying down strong brand foundations.

Mavroidis shows that brands can completely remake themselves in new markets, especially in China. But sometimes when the ‘global’ brand comes to China it is so different from the original that it’s just the same name but a different brand in most ways, she explains. Which sounds very exciting, and also dangerous. Local Chinese managers will ignore often the global brand essence, no matter how clearly conveyed. They feel that the global HQ don’t have anything relevant for them. You can set up a gorgeous brand at global HQ – that was designed with China in mind too – and genuinely would appeal to Chinese locals, but it may never see the light of day because the local management resists the input.

There differences often undermine or contradict the global brand position. Local managers supress the brand, since they are unconvinced in the reality if brand equity. As a result, some firms with niche strategies and premium pricing seem to be different in the BRICK markets, and can be thrown off course.

There are a few lessons that communications and marketing managers can learn from that experience. One is that international collabration is very important. Brand essenses can evaporate in the poor communication that often exists. Often communication managers will be the most highly skilled in maintaining and deepening brand over borders. But even they may not know how to help their colleagues in emerging markets to remake and refashion brands so that they relate better to the local market, yet still reflect the global brand.

The unfortunate reality is that IT and telecom suppliers’ brand essences seem rather refracted and differently reflect clients’ aspirations and needs. There are some modest immediate changes that organisations need to make now to ensure they become more able to carry establish brands into high-growth markets. However, there are some major trends that they cannot understand on the experience of their key domestic market. The powerful local experience of headquarter markets often undermines the ability to understand the changes that are needed to relate to high-growth markets which are not, emotionally or commercially, like the mature US and European markets.

As a result, communication and brand organisations (both in-house and on the agency side) are posed with some special tasks. They need to change to become flatter and more adaptive to local conditions. In turn that means pushing out a richer understanding of the core of the brand. Furthermore, that means that global firms, both agencies and corporates, need to ensure that the local firms understand and live the brand. Because local offices are too often approached as if all they need to do is translate a campaign, they will often will not be effective are really developing a rich, local understanding of the brand without special measures.

So the global headquarters needs also to be infused with the understanding of how to make the brand life locally. At the strategic level: they need to discover how to understand the high-growth markets and also understand the way that brands struggle to connect with consumers and corporate buyers while maintaining authenticity.

At the moment, says Mavroidis, brand are getting away with little authenticity in BRICK markets. She notes that many Asian consumers are status-driven and any amount of exposure to a brand (especially a foreign brand) is often enough to trigger purchases. Certainly, Katerina argues, the status quo will change. People will expect more with time from the brands they experience.

Despite today’s almost-easy entry into Asia’s markets, global price premiums will be very hard to defend without real brand equity that is understood in the local markets. In the short term, perhaps that means there is an immediate loss and threat to international brands, which are failing to build strong brand positions. In the medium term weak brands in high-growth markets are even bigger threat. Unless the international brands assert an authentic and defensible brand position, then they will fall rapidly.

So, global brands build on shifting sands and the top brand managers often don’t really know it. If the global management does not understand the need to communicate the brand clearly, internally and with agencies, then the brand will not be really established. The global HQ often fails to show, or understand, the universal value of the brand to local managers. On the other hand, often the local managers just do not understand the long-term value of brand as a way to sustain and develop premium prices. Of course, in the eyes of the global team the local managers have gone “anti-brand”, but the blame has to go at the global level, because that is where the power is to produce a solution.

Of course there’s another aspect of this, which Mavroidis is far too polite to mention. Most expatriate managers working in China have seen major political wars where red envelopes (Hongbao, rather than the original meaning) win over the ‘good of the brand’. If local managers feel that bribes are the the key to market dominance, then they might think that the communications budget should go into a better, fatter, redder envelope. However, bribes can work just the same as discount coupons: they discount the brand and can reward mercenary, fickle and disloyal behavior.

And to a certain degree, it’s right to understand that the understanding of brand equity is one of the most powerful tools against bribery. Managers in high-growth markets resort to bribes when they need the most ‘effective’ way of meeting the business objectives that their firms have. One thing that Mavroidis understands, partly from her training at Dartmouth‘s Tuck school (home of brand guru Kevin Lane Keller), is that the brand becomes a stronger source of defendable markets premiums. With all the copy cats there, Western brands are still doing surprisingly well for the moment. It is certainly hard to tell how the fortunes of these firms will continue without developing strong brand strategies.